The Rise of Automated Downcoding – White Paper
The Rise of Automated Downcoding: Trends, Causes, and Strategies for Physician Practices
By Cathy McDowell, MBA, BSN
President and CEO
Karen Zupko & Associates, Inc.
August 2025
Executive Summary
Physician practices are experiencing a sharp increase in systematic downcoding by major commercial payors (1)(6). This trend, driven largely by AI-powered algorithms, is resulting in significant revenue loss, higher administrative burden, and frustration for practices.
Background
Beginning in late 2022, payors began using AI and machine learning to evaluate claims, replacing the largely manual, audit-driven downcoding process. By 2025, this technology had transformed downcoding into a routine, automated cost-control strategy, predicting justified service levels from structured claim data.
Current Trends (2025)
1. Targeted Services: Evaluation & Management (E/M) visits are the most common adjustments, along with telehealth services and split/shared visits (3)(4).
2. Payors Leading the Trend: UnitedHealthcare (3), Cigna (4), Aetna (5), Regional Blue Cross/Blue Shield, Humana (6).
Why Is This Happening?
Cost Containment (6), Post-2021 CPT Guideline Shifts (1), Peer Comparison Algorithms (4), Documentation Gaps (2).
Impact on Practices
Revenue erosion can result in six-figure annual losses for practices. The administrative burden of appealing each claim delays payment and increases costs, while physicians report growing frustration as AI-driven decisions occur without full record review (6).
Strategies for Practices
Recommended strategies include monitoring CPT submissions against paid codes by payer, validating documentation internally, appealing denials with strong evidence, and strengthening documentation templates and workflows (6)(1)(2).
Advocacy and Industry Response
The AMA and MGMA are advocating for transparency in AI-driven downcoding algorithms (1)(6). Specialty societies such as AAOS and ACS are preparing position statements. Regulatory agencies, including CMS, have required that Medicare Advantage plans provide justification for automated downcoding and ensure a fair appeals process (2).
The Path Forward
Practices must collect evidence of inappropriate systemic downcoding, appeal every automated downcode to create a documented pattern (6), and engage with professional societies to push for transparency and oversight.
Conclusion
Automated downcoding represents a significant shift in payer behavior. By tracking trends, enhancing documentation, consistently appealing, and participating in advocacy efforts, physician practices can mitigate financial damage while advocating for systemic reform (6)(2).
KZA stands ready to partner with practices to provide support through downcoding impact dashboards, audit documentation for appeals, internal documentation education, and templates with guidance for the appeal process.
References
1. American Medical Association. (2021). CPT® Evaluation and Management Guidelines.
2. Centers for Medicare & Medicaid Services. (2021). MLN Matters SE21002: Evaluation and Management Services.
3. UnitedHealthcare. (2024). Professional E/M Coding Policy.
4. Cigna. (2024). E/M Review Guidelines.
5. Aetna. (2024). Clinical Policy Bulletins.
6. Medical Group Management Association. (2025). Advocacy Updates on Downcoding and AI Algorithms.